Private Equity Firm K1 has just taken a stand in the recruiting space, acquiring and infusing cash into several eRecruitment solutions offerings and appears to have paid a hefty price.
If you’ve been in the recruiting industry as a practitioner or technologist for any length of time, you’ve been watching the ever evolving recruiting technology landscape change in slow-mo over the past several years. If you have not already read them, both Madeline Laurano and George LaRocque have done excellent write-ups on this topic already. Madeline gives a good overview of the products, what we do and don’t know about the acquisition and what it means for the market. George breaks things down by Product, Market, and Fit. Here’s my take.
How Did We Get Here?
Applicant Tracking Solutions (ATSs) experienced the first splintering in the early 2000’s when the need for job board distribution arose. Those of us building ATS’s realized that the roadmap of features was already a mile long and tackling integrations into the seemingly endless number of emerging job boards was not realistic. This was especially true given the limited integration options available then. Virtually every ATS followed the same pattern, partnering with eQuest, RecruitUSA, IIRC and the like. This had a significant impact on how things unfolded. It kept the tools that companies use for talent sourcing at arms-length from the problem set the ATS providers were focused on solving. The ATS providers got deeper and deeper into process – interviewing, offer management, onboarding, multilingual, compliance. Anything to do with sourcing, including source tracking, was an afterthought for the ATS (which I will discuss more at length in a later post).
This took us to the mid 2000’s when the talent management suite emerged. Around this same time there were also rumblings about the topic of Search Engine Optimization (SEO) and this thing called Indeed. I remember talking to one customer asking, “who is Indeed and why are they scraping my site?” Campus recruiting, video interviewing, and scheduling solutions also arose to solve issues deeper in the cycle. But the siren song of the talent management suite rang loud and clear. There was no time to diverge and address sourcing or these other nit-picky problems; the focus was on the big picture. The larger enterprise players had shifted their focus, and the talent suite was their golden ticket. Just look at the differential in acquisition value of recruiting-only ATS providers BrassRing, Vurv and Virtual Edge – which hovered just over 100M in acquisition prices vs. Success Factors and Taleo which averaged more than 20X that value when they were acquired as talent management “suites” a few years later.
Same Trick, New Shtick
That was back in 2011/2012 and the world keeps turning and HR tech enthusiasts, myself included, continue to try to catch the wave of solving the worlds recruiting problems through new technology. That wave, however, is quickly becoming a tsunami of micro-waves. The recent explosion of options is finding people in the industry overwhelmed, confused, and unsure what’s coming next. Conceptually combining an ATS+recruitment marketing/CRM+referral solution+text/chat interviewing is very compelling. Clients still want a single solution that solves recruiting for them. As both a provider and recently as practitioner and consultant I have seen real pain trying to manage the splintered solutions that are out there. The data is messy, integration is a real challenge, and users are confused about what to use, which causes adoption suffer.
So putting it all together in one company makes sense, right? The suite was worth 20X the point solution before, does that math pay forward this time when the suite is now a talent acquisition suite? Generally, I think it might but does it in this specific case? Keep reading…
What Does the Customer Get?
So what are the customers gaining with this acquisition/roll-up? When I think about the customers for JobVite, Talemetry, RolePoint, and Canvas my brain starts to hurt. JobVite is a historically mid-market ATS that has built their own native recruitment marketing capabilities (what I’d call light but certainly good enough for their audience). JobVite is being established as the anchor tenant in this stack and if the goal is to go up market, these add-on solutions do not solve the core reason that JobVite is not an enterprise solution today.
There is a reason that if you look at the partner pages of JobVite, RolePoint, and Talemetry they do not have a reference to one another. They are not serving the same customers. That’s a problem. Can they solve it? Sure, if it’s a priority, and they can stay focused. But if it is a priority it will be at the expense of the priorities of their current non-overlapping customers and their near-term problems.
I believe the bet is that the clients of Oracle, IBM, SAP, iCims, PeopleFluent and Workday will now have a valid reason to consider switching to their “other provider’s” now anchor tenant – JobVite. However, that assumes that there’s not much value to the enterprise foundation at the heart of these ATSs. Will the market’s frustration at all the fragmented solutions overpower the need for having a solid enterprise-level foundation for ATS? I think that’s the bet that K1 has just made. I wish them luck, because talent acquisition teams need this stuff to work. And let’s face it, the HCM space is not yet living in the Slack world of easily inter-operable software; we’re at least another wave away from that one hitting our shores.